During firm valuation, WACC is calculated. What should be the formula for market value of equity considered in the WACC. Is it just the (outstanding shares * Price) or is there more to it?

Question

anonymous · Answer

WACC = w(d)*k(d)*(1-t) + w(e)*k(e)

Where:
w(d) = % debt in capital structure
w(e) = % equity in capital structure
k(d) = cost of debt
k(e) = cost of equity
t = tax rate

anonymous · Answer

WACC shows how much returns you expect from the overall capital invested i.e. from DEBT AND EQUITY. 
While calculating WACC you don't consider the actual market value of the Equity but the percentage of Equity to the overall Business or Capital. It is called as the WEIGHT OF THE EQUITY. This weight is multiplied by the Cost of Equity shown as k(e). What is K(e)? well, it's nothing but the EXPECTED PERCENTAGE OF RETURNS on Equity which the company have calculated. It can be calculated using CAPM model.

anonymous · Answer

Thanks meoowww and drishya5 for your replies